Accounting Chap 11

List the four steps in preparing a statement of cash flows in the correct order

1. calculate the net cash flows from operating activities 2. determine the net cash flows from investing activities 3. determine the net cash flows from financing activities 4. combine operating, investing, and financing activities

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows in their balances change during the year?

Accounts payable, inventory, account receivable

Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?

Calculate the change in the beginning and ending balance of cash

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection on account Interest received on notes receivable

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows

Depreciation expense originally reduced net income, but it is a noncash expense.

When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

False

The three classification on the statement of cash flows are cash flows from

Investing, operating, financing

Cash inflows from __ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets

Investments

In order to determine cash flows from financing activities, we need to examine changes to

Long-term liability and stockholders' equity accounts.

When using the indirect method to prepare the operating section of a statement of cash flows, the first amount listed is ___

Net income

Adjustments to net income in calculating operating cash flows include:

Noncash items Nonoperating items Changes in current assets and current liabilities

Cash receipts and cash payments for transactions relating to revenue and expenses activities are classified on the statement of cash flows as

Operating

Grants income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using indirect format, the loss should be

added to net income

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows

collection from customers receipt of interest

Which of the following represents the final step in preparing a statement of cash flows in the correct order?

combine operating, investing, and financing activities

Which of the following are common noncash items requiring adjustment to net income under the indirect method?

depreciation expense amortization expense

Cash flows from __ activities include both inflows and outflows of cash from the external funding of a business

financing

Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as ________ activities.

financing

The purchase and sale of long-term assets and current investments are classified as

investing

Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to _____ _____ to prepare the operating section for the indirect format of the statement of cash flows.

net income

The starting point for preparing the operating activities section using the indirect method is?

net income

The return on assets is calculated by dividing __ by __

net income/average total assets

Depreciation expense and amortization expense represent __ items requiring adjustments to net income under the indirect method

noncash

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) __ reduction to net income

noncash

Gains and losses on the sale of long-term assets represent common _____ items needing adjustment under the indirect method.

nonoperating

__ activities include cash receipts and cash payments for transactions relating to revenue and expense activities

operating

The statement of cash flows classifies items as

operating, investing, financing

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

related cash may be higher or lower than the accrued amount included in net income

The ratio that is calculated by dividing net income by average total assets is referred to as:

return on assets

Net cash flows provided by operating activities will be __ when using the direct method compared to the indirect method

same

The financial statement that provides information about cash receipts and cash disbursements for the period is

statement of cash flows

In a statement of cash flows, the sum of cash inflows and outflows is equal to

the change in the cash balance.

Issuing stock to owners is classified as an __ activity

Financing

Repayment of formal, long term debt contracts are classified as __ activities

Financing

Which of the following are nonoperating items that require adjustments under the indirect method?

Gains on the sale of long-term assets Losses on the sale of long-term assets

The statement of cash flows provides summary information about cash __ and cash __ during the year

Inflows - outflows

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

Payment on acc payable Interest paid on bonds Purchase of supplies

Which of the following would result in a cash outflow from investing activities?

Purchase of a machine for cash.

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows

Payment on account; payment of salaries

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

Payment on account; payment of salaries

Which of the following nonoperating items require adjustments to net income under the indirect method?

gains from sale of long-term assets losses from sale of long-term assets

Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as __ activities

investing